Mexican President Claudia Sheinbaum announced on Saturday that her administration will impose retaliatory tariffs in response to Washington's decision to implement a blanket 25% tariff on all Mexican imports.

The move, authorized under the International Emergency Economic Powers Act (IEEPA), marks a sharp escalation in trade tensions between the two countries.

In a statement on X, Sheinbaum expressed a preference for dialogue over confrontation but said that Mexico could not allow the US measures to go unanswered.

"I've instructed my economy minister to implement the Plan B we've been working on, which includes tariff and non-tariff measures in defense of Mexico's interests," she wrote, though she did not specify which US products would be targeted.

US-Mexico trade at risk

Trade between Mexico and the US has grown substantially over the past few decades, with industries such as automobiles, agriculture, and energy deeply intertwined. Fresh produce, oil, and manufactured goods move in both directions, making Mexico the largest destination for US exports as of 2023.

Mexico has been preparing for potential retaliatory measures, with sources indicating that tariffs between 5% and 20% could be applied to US pork, cheese, fresh produce, steel, and aluminum. The auto industry will initially be excluded, according to officials familiar with the plan.

While Sheinbaum has yet to disclose specific details, reports suggest that Mexico is considering non-tariff measures as well, potentially disrupting the supply chain flow between the two countries.

USMCA violations 

Mexico's Economy Minister Marcelo Ebrard condemned the tariffs, calling them a "flagrant violation" of the US-Mexico-Canada Agreement (USMCA). "Plan B is underway," Ebrard wrote on X. "We will win!"

The economic impact of these tariffs could be severe. The US imported over $475 billion worth of Mexican goods in 2023, while US exports to Mexico were valued at $322 billion, according to Census Bureau data.

Given that nearly one-third of Mexico's GDP is tied to exports to the US, the 25% tariff could result in a 12% drop in exports and a 4% contraction in GDP if it remains in place for a full year, according to Gabriela Siller, economic analysis director at Grupo Financiero BASE.

The decision has also sparked concerns among US businesses, particularly in the agricultural sector, which relies heavily on Mexico as an export market.

Read more: Trump tariffs Canada, Mexico, China, escalating trade tensions

Mexico's pushback

The White House has defended the tariffs, citing what it described as Mexico's handling of migration and drug trafficking, particularly the fentanyl crisis. Trump directly tied the new trade measures to these concerns, stating that Mexico had failed to "stop fentanyl" from reaching US borders.

Sheinbaum strongly rejected this narrative, calling it "slander." She defended her administration's efforts in combating drug trafficking, stating that since taking office in October, authorities had seized 20 million doses of fentanyl and arrested more than 10,000 individuals tied to the drug trade.

"If the United States government and its agencies wanted to address the serious consumption of fentanyl in their country, they could, for example, combat the sale of narcotics on the streets of their main cities, which they do not do, and the money laundering generated by this illegal activity that has done so much harm to their population," she wrote on X. 

Rechazamos categóricamente la calumnia que hace la Casa Blanca al Gobierno de México de tener alianzas con organizaciones criminales, así como cualquier intención injerencista en nuestro territorio.

Si en algún lugar existe tal alianza es en las armerías de los Estados Unidos…

— Claudia Sheinbaum Pardo (@Claudiashein) February 2, 2025

The Mexican government has also questioned the legality of the move under IEEPA, arguing that national security concerns related to drugs and migration should not justify economic sanctions on a trade partner.

Meanwhile, Ricardo Monreal, leader of Mexico's ruling party in Congress, described the US measures as "one of the heaviest attacks Mexico has received in its independent history."